Paying back signon bonus

In North Carolina, I received a $8000 sign on bonus from my employer. There were $2000+ dollars taken out in taxes. So I netted about $6000. I agreed to pay back the bonus if I leave the company within a year. I figure they’ll expect me to pay back $8000 when I only netted $6000. Am I just out the $2000 taxes that were deducted

I believe you are correct: they will expect you to pay back the $8,000.

However, if you report the $8,000 as income in 2002, and pay the taxes on that income, then if you repay the $8,000 in 2003, you can deduct the $8,000 in that year and your taxes will be proportionately less.

If you leave in 2002 and have to repay the bonus, either the company will amend their withholding so as to repay you what they withheld, so that you will come out even, or you will get the extra amount withheld back as a refund.

In either case, you will not lose the taxes deducted.

thanks for the reply. That's a load off my mind. Are you saying then that if I receive the bonus in 2002 and pay it back in 2003 I can deduct the $8000 I received in 2002 or that I would be deducting the $8000 I paid back in 2003. What type of deduction would that be or what entitles me to the deduction.

YOU SAY IF I RECEIVE THE BONUS IN 2002 AND PAY IT BACK IN 2003 I CAN DEDUCT THE $8000 I RECEIVED IN 2002 OR THAT I WOULD BE DEDUCTING THE $8000 I PAID BACK IN 2003. WHAT TYPE OF DEDUCTION WOULD THAT BE OR WHAT ENTITLES ME TO THE DEDUCTION.

If you receive the bonus in 2002 and report it as salary for 2002, then if you repay it in 2003, you can show it as negative salary in 2003. Attach a note to the return explaining the transaction.

My husband is in the same situation, and I am glad to hear that you can deduct the repayment. But will the amount of tax paid originally be completely wiped out by the deduction? In other words, if he were paid a bonus of $1000 and taxed 10% or $100, then he deducted the $1000 repayment from the next year's income, would it really net him $100 in tax savings? Also, is there any way to take a "future" deduction? He knows he'll have to pay it back this year, 2003 - but can he deduct it in 2002 and account for it later?

[abezon]

He can't deduct the money until he pays it.